May 26, 2005 (PLANSPONSOR.com) - A law firm has
concluded in a report released Wednesday that San Diego's
pension board probably violated California's conflict of
interest law in 1996 and 2002 by approving proposals to
underfund the retirement system.

In the report, lawyers with Luce, Forward, Hamilton
& Scripps reported a “significant risk” of board
violations of the law’s requirement that they disclose
financial interests and not take part in discussions and
votes in which they have conflicts, the San Diego Union
Tribune reported. “We are not aware of any facts that
demonstrate compliance with this requirement,” the report
said, according to the newspaper.

City officials hired the firm to examine legal issues –
including possible conflicts of interest at the beleaguered
and scandal-ridden $3.6 billion San Diego City Employees
Retirement System (See
San Diego Pension
Debacle Heats Up Again
).

Last week, the San Diego District Attorney’s Office
charged six current and former pension trustees, who were
public employees while serving on the board, with multiple
violations of the state conflict-of-interest law. The
private legal opinion was released by City Attorney Michael
Aguirre, a day after the City Council voted to waive
attorney-client privilege and hand the document over to the
District Attorney’s Office.

The report said that under the law, conflicts by some
members of the board would have “disabled the entire
board.”

The report also said that a possible legal exception –
known as the “rule of necessity” – may not apply.
Under that rule, public officials are allowed to vote on
matters in which they have a conflict of interest if their
disqualification would make it impossible for a public
agency to fulfill its duties.

Aguirre said the report buttresses his position that the
board acted illegally, and he called again on the mayor and
council to wipe out benefits granted as part of the
underfunding arrangements (See
San Diego City
Attorney Calls Pension Credit Purchase Illegal
). He said that would trim more than $700 million from a
pension system deficit estimated at $1.4 billion or
more.